Siem Industries Inc. SEMUF
March 30, 2009 - 5:05pm EST by
dadande929
2009 2010
Price: 22.25 EPS $10.00 $7.00
Shares Out. (in M): 15 P/E 2.2x 3.1x
Market Cap (in $M): 365 P/FCF 1.9x 1.9x
Net Debt (in $M): 106 EBIT 222 186
TEV (in $M): 258 TEV/EBIT 1.2x 1.4x

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Description

Siem Industries is run by Kristian Siem, who has been called the Buffett of Norway. Siem Industries trades, according to our calculations, at huge 52.75% discount to the value of its portfolio of publicly traded holdings.

Siem Industries itself is a holding company that is comprised of public investments as well as some private investments. The public investments have a quoted price, and the company itself, Siem, at $22.25/share bid trades at a large (45.4%) discount to the $40.78/share value of just its public investments.

Siem owns interests in Subsea 7 (SUB NO), Siem Offshore (SIOFF NO), and STAR Reefers (SRI NO), all of which are publicly traded companies. Siem's interest in Subsea 7 is valued as I write at $423.3 million US and amounts to $27.56 per Siem share and accounts for 48% of Siem's NAV. I think it is very interesting to note that Subsea 7 is trading as if it is destined to go out of business.....as are many other oils service companies.

Siem also owns 88% of Siem Car Carriers, which is involved in the shipping business. It owns 64% of Siem Capital AB which is an investment company. It also owns 100% of an entity called Siem Investments, and Deusa, a German potash mining business and 51% of Deep Sea Insurance.

Not at all unlike all the very depressed oil services companies, Siem's holdings certainly has some value, though arguably an indeterminate value,  that is clearly not reflected in the stock. The principal reason Siem trades at such huge discount large discount is that is that the US market -- which is the only market for SEMUF  is in the Pink Sheets and the stock is rather illiquid. It is difficult to buy and it is certainly is very difficult to sell. Butthis does not mean itcan't be done. One only need be very patientIt's not that the parent company's stock price is forecasting a diminution in the value of the publicly traded subsidiaries; it's that the parent company's stock is very difficult to trade; and therein lays the opportunity for gain.

The very weak stock market has precipiatated the decline of the very thinly trading shares of SEMUF, but if purchased and held by patient investors in time the catalysts will begin to function and reward.


                                                                  Calculation of NAV

    SIEM INDUSTRIES     30-Mar-09    
               
Currency              
Norwegian kroner - NOK 6.82118            
               
Company Symbol Price Shares U.S. Price Value %of net  $per share
  (bloomberg)         assets  
    Last Price          
Trans-Ocean RIG 59.24   8.68                        -   0.0%            -  
Subsea 7 SUB NO 40.75 70,109,045 5.97     418,834,216.92 47.5%       27.23
Siem Offshore SIOFF NO 6 85,504,538 0.88       75,210,920.69 8.5%         4.89
star reefers SRI NO 138 6,272,534 20.23     126,900,285.87 14.4%         8.25
siem thoen carriers               35,000,000.00 4.0%         2.28
               
other investments Deusa               25,000,000.00           1.63
               
Total Current Assets             680,945,423.48         44.27
               
Net PPE              
cash from RIG             218,500,000.00         14.21
bond buyback net gain               23,000,000.00    
               
Total Assets             922,445,423.48         59.98
               
Current Liabilities(sioff purchase)               40,000,000.00    
Long term liabilities              
Other liabilities              
               
Total liabilities               40,000,000.00    
               
Net Assets             882,445,423.48    
               
Shares Outstanding               15,379,927.00    
               
NAV                           57.38    
               
current price SEMUF SEMUF equity                       22.75    
discount                             0.60    
               
% gain to NAV         152.20%    

Catalyst

1. Reversal of fortune. Every recession to date has come to an end. There reasonable expectation that oil exploration will need to increase to satisfy future demand in a world of expanding industrial production and expanding population, the oil price is probably going to rise, and oil exploration is likely to increase an so too will ocean commerce where SEMUF's current principal investments are operative. NAV based on market values of the SEMUF investment s will rise, private investments will work out and new investment opportunities found and made.

2. The discount will narrow and if history is any guide possibly fall by perhaps as much as half to levels the discount to NAV  has been frequently in the past

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